Some of the world’s largest oil producers are scheduled to meet in Doha, Qatar on Sunday to address the global oil oversupply, but hopes of a deal to cut production have fallen apart even before the meeting began.
With a day to go to the meeting, Iran has announced it will not attend, and Saudi Arabia is openly musing about flooding the world with desperately unneeded oil.
Saudi Deputy Crown Prince Mohammed bin Salman told Bloomberg his country could immediately ramp up production by a million barrels per day, to 12.5 million barrels, “if we wanted to.” He also suggested the country has the capacity to nearly double its oil production, to around 20 million barrels per day.
“I don’t suggest that we should produce more, but we can produce more,” the prince said.
Analysts suggest the world is currently overproducing oil by 1-2 million barrels per day.
The thinly-veiled threat is aimed squarely at Iran, Saudi Arabia’s regional rival and a new competitor in the oil market. Iran recently began selling oil into the global oil market after the international community lifted sanctions.
“Middle East politics could once again trump oil economics.”-- BofA Merril Lynch
The two are involved in a price war. The Saudis cut their oil export price by 10 cents per barrel this week and Iran followed, the Wall Street Journal reports.
Analysts say the apparent collapse of the Doha talks could send oil prices back down to around the US$30-per-barrel mark, from its current levels around US$40.
“Middle East politics could once again trump oil economics,” Bank of America Merrill Lynch said this week.
But what the Doha talks can’t accomplish, U.S. energy producers just might. Shale oil producers in the U.S., who have made the country once again the world’s largest producer of oil, are cutting back on production amid prices that are below production cost.
The International Energy Agency said this week it expects that the shrinking production levels in the U.S. will ease the oil glut by the second half of this year.
North American oil traded as high as US$42.17 a barrel this week, as traders looked forward to a deal in Doha, but fell back to US$40.36 by the end of the week, as expectations fizzled.